Suppose the price elasticity of demand for tacos is 0.80.If the price of tacos increases by 10 percent,then the quantity demanded of tacos should,ceteris paribus:
A) Decrease by 8 percent.
B) Increase by 8 percent.
C) Decrease by 1.25 percent.
D) Increase by 1.

Question

Quizplus · Accepted Answer

The price elasticity of demand measures the sensitivity of the quantity demanded to changes in the price. A price elasticity of demand of 0.80 means that a 1 percent increase in price leads to an 0.80 percent decrease in quantity demanded. Therefore, a 10 percent increase in price will lead to a 8 percent decrease in quantity demanded (0.80 x 10 = 8).

Suppose the Price Elasticity of Demand for Tacos Is 0